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Rotten Economy in the Big Apple; More Dark Job Forecasts for New York’s Finance Business

May 20, 2008
The forecasts for New York City’s economy keep getting worse.

A year ago, the mayor’s economic advisors predicted the city would lose 2,000 jobs at securities firms this year. Then, last winter, the city’s Independent Budget Office said the number of financial sector layoffs would reach 12,000 in 2008 and 20,000 over the next two years.

But now, with Wall Street investment firms posting enormous losses, the IBO estimates the city will lose 33,300 financial jobs through the second quarter of 2009.

“Certainly our economic forecast has gotten darker,” said Doug Turetsky, chief of staff of the IBO.

The loss of more than 33,000 financial jobs would be a 17 percent reduction in the city’s highest-paid workforce and would be steepest drop since 2001-2003, when 40,000 securities industry employees lost their jobs.

“We didn’t know that the Wall Street firms had had such a disastrous fourth quarter,” says George Sweeting, deputy director of the IBO. “We said, ‘Let’s assume they have zero profits in the fourth quarter,’ and it turned out they lost 16-point-something billion in the fourth quarter. That was a big adjustment.”

As the outlook for the financial industry dims, the IBO’s picture for the wider city economy also has soured. In its winter forecast, it predicted the city would lose 2,000 jobs this year. But because the city relies so heavily on the financial sector, the prospect of widespread losses on Wall Street has resulted in a revised estimate for the overall economy.

The IBO now sees a decline of 59,400 jobs between the city’s most recent employment peak in the first quarter of this year and the expected trough in the second quarter of 2009.

A recession is imminent, if it has not already begun, according to the report, and will last longer than the national one, with recovery not coming until the second quarter of 2009. Recent employment statistics have been ambiguous, showing slight gains, but it is just a matter of time before the numbers start to catch up with announced layoffs.

The grim job front has resulted in an equally pessimistic tax revenue forecast. The IBO estimates that tax revenue will be flat this year compared with 2007, and will then fall by 5.2 percent to $35.8 billion in 2009 before growing modestly in 2010.

Despite the economic doom, the IBO forecasts the city will have a balanced budget through 2010. A $4.6 billion surplus and $1 billion in proposed spending cuts by Mayor Michael Bloomberg mean the city will avoid any shortfalls in the next two fiscal years.

Filed by Daniel Massey of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.